We are likely to see a revival of remodeling nation wide. As homeowners see that they are upside down and locked into their current home for a long time, they will turn to remodeling their home to fit their lifestyle changes. They may not be able to sell and buy to meet their needs. They will need to change the home they live in.
This is going to lead to appraisals that do not correctly value the upgrades that owners make. Most appraisals, like it or not, are still done primarily by the square foot and age in a given geographic area. Under the current regulation and the inability of agents and lenders to talk to appraisers we somehow need to make them aware of an upgraded home. There lies the problem.
Anyone looking to refinance for any reason may also have a problem. The cost of the renovations will either need to be paid for in cash or a home improvement loan will need to be taken in advance of the work. This may force a non-contractor home owner who is capable of the work to hire a contractor who can submit draws or a final billing to get the funds paid out of the loan in escrow. There will be extra cost for the owner.
What about the owner that has improved their home and is now looking to borrow for a child's education? Will the improvements actually be considered in the appraisal?
And of course, eventually most homes will be sold. Births, deaths, retirement, job loss, job changes, marriage and divorce are the driving forces in the real estate industry. Will the homeowner be rewarded or financially damaged at the time of sale for any improvements made over time.
Jerry Germansen
Associater Broker, eXp Realty
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